Three reasons it makes sense for Snapchat to turn down $3 billion from Facebook

November 13, 2013
November 13, 2013

Evan Spiegel is one confident 23-year-old. The Snapchat founder turned down a $3 billion offer from Facebook for his photo-messaging application service, according to the Wall Street Journal.

Snapchat has been growing at breakneck speed. It has 100 million users who send 350 million photos and videos to each other each day. But it’s still in “pre-revenue” stages. That’s right. With no advertising on the service, Snapchat is yet to generate any sales, let alone profit. The company has already attracted at least $75 million in venture funding, and also recently rebuffed an approach from China’s Tencent.

It’s either a refreshing sign of independence, or complete insanity, depending upon your perspective. Facebook is the most acquisitive player in the social media space at the moment. Its $1 billion purchase of Instagram is now generally being viewed as a shrewd one. But the $3 billion it was reportedly prepared to pay for Snapchat represents nearly a third of the company’s cash pile. And having already been rebuffed once, it’s doubtful Zuckerberg would come back to the table with a higher offer. We can only imagine what Spiegel is thinking:

1. If Facebook could do it, why can’t I?

Mark Zuckerburg famously turned down acquisition offers from the giants of the time, Yahoo (for $1 billion) and Microsoft ($15 billion), and it worked out OK for him.

2. If Twitter can do it, why can’t I?

In many ways, Twitter’s successful IPO is even more instructive for a company like Snapchat. It proves Facebook was no fluke. And  Twitter’s founders also famously rejected overtures from Zuckerburg (not to mention former US vice president Al Gore) and it worked out OK for them.

3. I am completely nuts, but I don’t care.

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